His capture was the culmination of a yearlong intelligence operation.
Villarreal, who got his improbable nickname from his fair complexion, is wanted in the United States for allegedly smuggling tons of cocaine. In Mexico, he is blamed for a brutal turf war that has included bodies hung from bridges, decapitations and shootouts as he and a rival fought for control of the divided Beltran Leyva cartel.
There was no word from Mexican authorities on any extradition plans. Federal Police Commissioner Facundo Rosas says Valdez is a U.S. citizen but that authorities were not quite sure if he also held Mexican nationality.
U.S. authorities had offered a reward of up to $2 million for information leading to his capture, and the Mexican government offered a similar amount.
Valdez is the third major suspected drug lord to fall in Mexico in the past ten months.
The Associated Press contributed to this report.